Congressional Republicans returned to Washington from their August recess with a lot of things on their to-do list, chief among them Hurricane Harvey relief efforts and keeping the government running. But President Trump has also begun putting intense pressure on Republicans to take on tax reform.
Republicans must start the Tax Reform/Tax Cut legislation ASAP. Don't wait until the end of September. Needed now more than ever. Hurry!
— Donald J. Trump (@realDonaldTrump) September 8, 2017
This poses a problem for Republicans, as there is currently no such tax proposal in Congress. Treasury Secretary Steven Mnuchin insisted Tuesday that a tax reform plan will be passed this year, despite the fact that, 10 months into the Trump administration, there exists no concrete, proposed policy. Politico reported Tuesday that congressional Republicans haven’t seen any details on what the policy would look like and are concerned they may eventually have to vote on top-down legislation they haven’t read. The last time that happened was over the summer when Congress tried to repeal Obamacare, which ended in disaster.
“This time around there is no room for error. This has got to be a home run,” Rep. Dave Brat (R-VA) told Politico. “I would hope everyone wants to know what’s in it before you vote on it. That’s the old [Nancy] Pelosi joke on health care, it turned into a colossal joke. ‘You’ll find out what’s in it after we pass it.’”
What is known about any potential tax plan comes from a very vague White House proposal released in April and what the president says himself. At a campaign-style rally to promote his proposal in North Dakota last week, Trump called for an overhaul of the tax code, a huge tax cut for the middle-class by raising the standard deduction, and lowering the corporate tax rate to about 15 percent.
“We’re going to reduce the tax rate on American business so they can keep our jobs in America, create jobs in America, and compete for workers right here in America,” said Trump in North Dakota. “Meaning higher wages and greater profits for companies.”
Mnuchin said Tuesday that he “[doesn’t] know if [they’ll] be able to achieve that given the budget issues” however, they plan to “get this down to a very competitive level.” House Speaker Paul Ryan has said he thinks that competitive level is in the low 20s, but even that is costly. Sen. John Thune (R-SD) said getting the corporate tax rate down from 35 to 20, would cost “about $100 billion per point.” The more the president campaigns for a 15 percent corporate tax rate, the harder it will be for him to change his position, considering it has been central to his whole pitch.
Cutting the corporate tax rate is also hugely unpopular among Americans. A Politico/Morning Consult poll found that 34 percent of respondents support cutting the tax rate to 15 percent, while six in 10 said corporations pay too little in taxes. 74 percent support tax cuts for the middle class, yet it remains to be seen just how those tax cuts, which Trump has called the biggest in U.S. history, will be paid for without busting the federal deficit.
Unpopular policies and party in-fighting aren’t the only problem Trump faces: the end of year deadline the administration has set for itself presents another steep challenge entirely. A recent Bloomberg poll found that, out of 42 economists surveyed, 23 don’t expect Congress to pass tax-cut legislation by their deadline. The last time there was a comprehensive, bipartisan rewrite of U.S. tax law was in 1986, and took more than two years of debate and negotiation.
Trump’s recent acts of bipartisanship, like striking up a deal with Democratic party leaders Sen. Chuck Schumer (D-NY) and Rep. Nancy Pelosi (D-CA) could also cause more problems for tax reform, emboldening Democrats while frustrating House Freedom Caucus members who are in the dark and plan to not move forward with a budget resolution until they are filled in on the specifics of tax policy. Without a budget resolution there is no tax reform — and Republicans have to agree on a 2018 budget resolution in order to use reconciliation to pass a tax plan in the Senate with only 50 votes rather than 60.
Trump has been busy in recent weeks reaching out to vulnerable Democrats from states where he won by large margins who may be more willing to cross the aisle on tax reform. On Tuesday last week, North Dakota Sen. Heidi Heitkamp joined Trump during a speech to supporters; Heitkamp and two other senators, Sens. Joe Donnelly (D-IN) and Joe Manchin (D-WV), have also not yet endorsed the Democratic caucus’ principles of no tax cuts for the wealthy, no increase in the deficit, and no use of procedures to avoid the filibuster.